1) Employer-employee relationship
Four-fold test of employment relationship:
- selection and engagement of the employee or the power to hire;
- payment of wages;
- the power to dismiss; and
- the power to control the employee
(Salazar v. Simbajon, G.R. No. 202374, 30 June 2021)
Power of Control
The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. However, the power of control refers merely to the existence of the power, and not to the actual exercise thereof.
No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. However, a finding that such relationship exists must still rest on some substantial evidence.
(Dusol v. Lazo, G.R. No. 200555, 20 January 2021)
2) Independent Contractor
It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather than a regular employee with or without a fixed term.
(Fuji Television Network, Inc. v. Espiritu, G.R. Nos. 204944-45, December 3, 2014)
3) Contracting Arrangements
There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
(ARTICLE 106, Labor Code of the Philippines)
The following must be considered in determining whether an entity is a legitimate job contractor or is engaged in labor-only contracting:
- registration with the proper government agencies;
- existence of substantial capital or investment;
- service agreement that ensures compliance with all the rights and benefits under labor laws;
- nature of the activities performed by the employees, i.e., if they are usually necessary or desirable to the operation of the principal’s company or directly related to the main business of the principal within a definite predetermined period; and
- the exercise of the right to control the performance of the employees’ work.
The true nature of the relationship between the principal, contractor, and employee cannot be dictated by mere expedience of a unilateral declaration in a contract.
Previous declarations that a company is an independent job contractor cannot validly be the basis in concluding its status as such in another case involving a different employee. The totality of the facts and surrounding circumstances, distinct in every case, must be assessed in determining whether an entity is a legitimate job contractor or a labor-only contractor.
In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.
(Conjusta v. PPI Holdings, Inc., G.R. No. 252720, 22 August 2022)
4) Illegal Recruitment, Contract Substitution
The substitution or alteration of employment contracts is listed as a prohibited practice under Article 34 (i) of the Labor Code of the Philippines. To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the Department of Labor and Employment” — is considered an act of “illegal recruitment” under Section 6 (i) of Migrant Workers and Overseas Filipinos Act of 1995.
Mere intention to commit contract substitution should not be left unpunished.
(Fil-Expat Placement Agency, Inc. v. Lee, G.R. No. 250439, 22 September 2020)
5) Regular Employment
The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer x x x.
(ARTICLE 295, Labor Code of the Philippines)
What determines regular employment is not the employment contract, written or otherwise, but the nature of the job. The applicable test is the reasonable connection between the particular activity performed by the employee in relation to the usual business of the employer.
(Laurente v. Helenar Construction, G.R. No. 243812, 07 July 2021)
6) Fixed Term Employment
Contracts of employment for a fixed term are not unlawful unless it is apparent from the circumstances that the periods have been imposed to circumvent the laws on security of tenure. The Supreme Court has laid down the criteria of a valid fixed-term employment, to wit:
- The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or
- It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter.
Contracts of employment for a fixed period terminate on their own at the end of such period.
(Tuppil, Jr. v. LBP Service Corp., G.R. No. 228407, 10 June 2020)
7) Money Claims, Burden of Proving Payment
In determining the employee’s entitlement to monetary claims, the burden of proof is shifted from the employer or the employee, depending on the monetary claim sought.
In claims for payment of salary differential, service incentive leave, holiday pay, and 13th month pay, the burden rests on the employer to prove payment. This standard follows the basic rule that in all illegal dismissal cases the burden rests on the defendant-employer to prove payment rather than on the plaintiff-employee to prove non-payment. This likewise stems from the fact that all pertinent personnel files, payrolls, records, remittances and other similar documents — which show that the differentials, service incentive leave and other claims of workers have been paid — are not in the possession of the worker but are in the custody and control of the employer.
On the other hand, for overtime pay, premium pays for holidays and rest days, the burden is shifted on the employee, as these monetary claims are not incurred in the normal course of business. It is thus incumbent upon the employee to first prove that he actually rendered service in excess of the regular eight working hours a day, and that he in fact worked on holidays and rest days
(Zonio v. 1st Quantum Leap Security Agency, Inc., G.R. No. 224944, 05 May 2021)
8) Wage Distortion
Concept
Wage distortion is a situation where an increase in the minimum wages prescribed by law or wage order results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in the same establishment within the region thereby effectively obliterating the distinctions embodied in the wage structure based on skills, length of service, or other logical bases of differentiation.
Elements of Wage Distortion
Wage distortion can exist only when the following elements are
present:
- The establishment has an existing hierarchy of positions with corresponding salary rates, i.e., wage structure. In a problem dealing with wage distortion, the basic assumption is that there exists a grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. The formulation of a wage structure through the classification of employees is a matter of management judgment and discretion. The employees cannot create their own independent classification of employees and use it as a basis to demand an across-the-board increase in salary. Neither can the NLRC, under the guise of rectifying a wage distortion, unilaterally impose upon an employer a new scheme of classification of employees where none has been previously established.
- The Regional Wage Board (or Congress) has issued a minimum wage order (or law). For wage distortion to exist, the wage increase must come from implementation of a law or wage order. Article 124 of the Labor Code does not contemplate wage increase brought about by implementation of a collective bargaining agreement. Neither does it contemplate wage adjustment brought about by merit increase.
- The new minimum wage resulted in significant increase in the salary rate of the lower pay class (in the existing hierarchy of positions) without a concomitant increase in the salary rate of a higher one, to the point that the significant increase in salary rate has eliminated or severely contracted the distinction between the two levels. The quantitative wage distinction need not be obliterated. It is enough that the quantitative wage distinction was severely contracted.
- The resulting distortion must affect employees in the same establishment within the region. This means that the grant of higher wages in the same establishment in one region than in the same establishment in another region is not wage distortion. The difference in wages between employees in the same pay scale in different regions is not the mischief sought to be banished by law.
Procedure for Correction of Wage Distortion in Unionized Establishments
- The employer and the union shall negotiate to correct the distortions.
- If the negotiations fail, the matter shall be brought to the grievance machinery under their collective bargaining agreement.
- If the grievance machinery fails to settle the dispute, the matter shall be threshed out through voluntary arbitration.
Procedure for Correction of Wage Distortion in Non-Unionized Establishments
- The employers and workers shall negotiate to correct such distortions.
- If negotiations fail, the matter shall be brought to the NCMB for conciliation.
- If the NCMB fails to settle the dispute, the matter shall be referred to the NLRC for compulsory arbitration.
(ARTICLE 124, Labor Code of the Philippines)
9) Non-Diminution Rule
Generally, employees have a vested right over existing benefits that the employer voluntarily granted them. These benefits cannot be reduced, diminished, discontinued or eliminated consistent with the constitutional mandate to protect the rights of workers and promote their welfare.
The non-diminution rule applies only if the benefit is based on an express policy, a written contract, or has ripened into a practice.
(Home Credit Mutual Building and Loan Association v. Prudente, G.R. No. 200010, 27 August 2020)
10) Seafarers
POEA-SEC, Concealment
Section 20, paragraph E of the POEA-SEC clearly provides that a seafarer who knowingly conceals a pre-existing illness or condition in the Pre-Employment Medical Examination (PEME) shall be liable for misrepresentation and shall be disqualified from any compensation and benefits.
The rule seeks to penalize seafarers who conceal information to pass the pre-employment medical examination. It even makes such concealment a just cause for termination.
There is a “pre-existing illness or condition” if prior to the processing of the POEA contract, any of the following is present:
- the advice of a medical doctor on treatment was given for such continuing illness or condition; or
- the seafarer has been diagnosed and has knowledge of such illness or condition but failed to disclose it during the pre-employment medical examination, and such cannot be diagnosed during such examination.
(Trans-Global Maritime Agency, Inc. v. Utanes, G.R. No. 236498, 16 September 2020)
POEA-SEC, Establishing Compensability, Conditions
To be entitled to disability benefits for an occupation illness listed under Section 32-A of the POEA-SEC, a seafarer must show compliance with the following conditions:
- The seafarer’s work must involve the risk described therein;
- The disease was contracted as a result of the seafarer’s exposure to the described risks;
- The disease was contracted within a period of exposure and under such other factors necessary to contract it; and
- There was no notorious negligence on the part of the seafarer.
(Trans-Global Maritime Agency, Inc. v. Utanes, G.R. No. 236498, 16 September 2020)
11) SSS
Dependents
The dependents shall be the following:
- The legal spouse entitled by law to receive support from the member;
- The legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not gainfully employed, and has not reached twenty-one (21) years of age, or if over twenty-one (21) years of age, he is congenitally or while still a minor has been permanently incapacitated and incapable of self-support, physically or mentally; and
- The parent who is receiving regular support from the member.
(Section 8 (e), Social Security Act of 2018.)
Beneficiaries
The dependent spouse until he or she remarries, the dependent legitimate, legitimated or legally adopted, and illegitimate children, who shall be the primary beneficiaries of the member: Provided, That the dependent illegitimate children shall be entitled to fifty percent (50%) of the share of the legitimate, legitimated or legally adopted children: Provided, further, That in the absence of the dependent legitimate, legitimated or legally adopted children of the member, his/her dependent illegitimate children shall be entitled to one hundred percent (100%) of the benefits. In their absence, the dependent parents who shall be the secondary beneficiaries of the member. In the absence of all the foregoing, any other person designated by the member as his/her secondary beneficiary.
(Section 8 (k), Social Security Act of 2018)
12) Management Prerogatives
Promulgation of Policies, Rules and Regulations
An employer enjoys a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities of the employees so long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements. Company policies and regulations are generally valid and binding on the parties and must be complied with until finally revised or amended, unilaterally or preferably through negotiation, by competent authority.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16 September 2020)
Dismissal of Employees
Indeed, the power to dismiss is a formal prerogative of the employer, but this is not without limitations. The employer is bound to exercise caution in terminating the services of his employees and dismissals must not be arbitrary and capricious. Due process must be observed and employers should respect and protect the rights of their employees. To effect a valid dismissal, the law requires not only that there be just and valid cause; it must also be supported by evidence. There must be a reasonable proportionality between the offense and the penalty. Dismissal, without doubt, is the ultimate penalty that can be meted to an employee. Hence, where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to visited with a consequence so severe.
(Verizon Communications Philippines, Inc. v. Margin, G.R. No. 216599, 16 September 2020)
13) Just Causes for Terminating Employment
An employer may terminate an employment for any of the following causes:
- Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
- Gross and habitual neglect by the employee of his duties;
- Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
- Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
- Other causes analogous to the foregoing.
(ARTICLE 297, Labor Code of the Philippines)
The burden of proving that the termination of an employee was for a just or authorized cause lies with the employer. If the employer fails to meet this burden, the conclusion would be that the dismissal was unjustified and therefore, illegal.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16 September 2020)
Serious Misconduct, Elements:
- the misconduct must be serious;
- it must relate to the performance of the employee’s duties showing that the employee has become unfit to continue working for the employer; and
- it must have been performed with wrongful intent.
(Mariano v. G.V. Florida Transport, G.R. No. 240882, 16 September 2020)
Willful Disobedience/Insubordination, Elements
- the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and
- the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16 September 2020)
Loss of Trust and Confidence
To justify a valid dismissal based on loss of trust and confidence, the concurrence of two (2) conditions must be satisfied:
- the employee concerned must be holding a position of trust and confidence; and
- there must be an act that would justify the loss of trust and confidence.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16 September 2020)
Requirements of Procedural Due Process in Termination of Employment for Just Causes
To effect a valid dismissal on the ground of a just cause, the employer must substantially comply with the following standards of due process:
- a first written notice — containing the specific cause or grounds for termination under Article 297 of the Labor Code, and company policies, if any; detailed narration of the facts and circumstances that will serve as basis for the charge; and a directive to submit a written explanation within a reasonable period;
- after serving the first notice, the employer should afford the employee ample opportunity to be heard and to defend himself; and
- after determining that termination of employment is justified, the employer shall serve the employee a written notice of termination indicating that all circumstances involving the charge against the employee have been considered; and the grounds have been established to justify the severance of his employment.
(Bicol Isarog Transport System, Inc. v. Relucio, G.R. No. 234725, 16 September 2020)
Belated Due Process
Where the dismissal is for a valid cause, the lack of statutory due process will not nullify the dismissal, or render it illegal or ineffectual. The employer will not be required to pay the employee backwages. However, the employer should indemnify the employee for the violation of his statutory right in the form of nominal damages.
(Mariano v. G.V. Florida Transport, G.R. No. 240882, 16 September 2020)
Reinstatement without Backwages
Even though it is basic in labor law that an illegally dismissed employee is entitled to reinstatement, or separation pay if reinstatement is not viable, and payment of full backwages, in some instances, the Court has carved out exceptions where the reinstatement of an employee was ordered without an award of backwages. This is on account of:
- the fact that dismissal of the employee would be too harsh of a penalty; and
- that the employer was in good faith in terminating the employment.
(Verizon Communications Philippines, Inc. v. Margin, G.R. No. 216599, 16 September 2020)
14) Constructive Dismissal
The law recognizes situations wherein the employee must leave his or her work to protect one’s rights from the coercive acts of the employer. The employee is considered to have been illegally terminated because he or she is forced to relinquish the job due to the employer’s unfair or unreasonable treatment. The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled to give up his position under the circumstances.
(Fil-Expat Placement Agency, Inc. v. Lee, G.R. No. 250439, 22 September 2020)
15) Authorized Causes for Terminating Employment
The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking x x x.
(ARTICLE 298, Labor Code of the Philippines)
Closure
Article 298 of the Labor Code of the Philippines considers closure of business as an authorized cause for the dismissal of employees, whether or not the closure is due to serious business losses. However, if the closure is not due to serious business losses, the employer is required to pay its employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher.
(Dusol v. Lazo, G.R. No. 200555, 20 January 2021)
16) Liability of Corporate Officers
Company officials cannot be held solidarily liable with the corporation for the termination of the employee’s employment absent any showing that the dismissal was attended with malice or bad faith.
(Mariano v. G.V. Florida Transport, G.R. No. 240882, 16 September 2020)
17) Collective Bargaining Agreement, Negotiations, GOCCs
The parties in a collective bargaining agreement may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order, or public policy.
(Social Housing Employees Association, Inc. v. Social Housing Finance Corp., G.R. No. 237729, 14 October 2020)
The right of government employees to self-organization is not as extensive as in the right of private employees. Likewise, the right of government employees to collective bargaining and negotiation is subject to limitations. Only the terms and conditions of government employment not fixed by law can be negotiated.
(Clark Development Corp. v. Association of CDC Supervisory Personnel Union, G.R. No. 207853, 30 March 2022)
Officers and employees of government-owned or controlled corporations without original charters are covered by the Labor Code, not the Civil Service Law. However, non-chartered government-owned or controlled corporations are limited by law in negotiating economic terms with their employees. This is because the law has provided the Compensation and Position Classification System, which applies to all government-owned or controlled corporations, chartered or non-chartered.
(GSIS Family Bank Employees Union v. Villanueva, G.R. No. 210773, 23 January 2019)
18) Strikes
The Labor Code of the Philippines and its implementing rules limit the grounds for a valid strike to:
- a bargaining deadlock in the course of collective bargaining, or
- the conduct of unfair labor practices by the employer.
Only a certified or duly recognized bargaining representative may declare a strike in case of a bargaining deadlock. However, in cases of unfair labor practices, the strike may be declared by any legitimate labor organization.
(Bigg’s, Inc. v. Boncacas, G.R. Nos. 200487 & 200636, March 6, 2019.)
19) National Interest Disputes
Once the Secretary of Labor assumes jurisdiction over a labor dispute, a strike, whether actual or intended, is automatically enjoined.
If a strike has been declared, the strikers must return to work even if they filed a motion for reconsideration of the assumption order.
The moment a striker defies a return-to-work order, he is deemed to have abandoned his job. It is already in itself knowingly participating in an illegal act.
Considering that an illegal act was committed, all strikers, whether union officers or plain members, may be declared to have lost their employment status.
(Rodriguez v. Philippine Airlines, Inc., G.R. Nos. 178501 & 178510, January 11, 2016.)
20) Jurisdiction of the Labor Arbiter vis-a-vis POEA (now Department of Migrant Workers)
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic Act (RA) No. 10022, provides that the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide the claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary, and other forms of damage.
Rule X of the Implementing Rules and Regulations of RA No. 10022 provides that the POEA exercises administrative jurisdiction arising out of violations of rules and regulations and administrative disciplinary jurisdiction over employers, principals, contracting partners, and overseas Filipino workers.
(U R Employed International Corp. v. Pinmiliw, G.R. No. 225263, 16 March 2022)
21) Reinstatement Pending Appeal
x x x In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. x x x
(ARTICLE 229, Labor Code of the Philippines)
The obligation to reinstate pending appeal exists only when the decision of the Labor Arbiter expressly orders reinstatement.
(Filflex Industrial & Manufacturing Corp. v. National Labor Relations Commission, G.R. No. 115395, 12 February 1998)
Therefore, if the decision of the Labor Arbiter did not order reinstatement (despite the finding that the employee was illegally dismissed), the NLRC, in resolving the appeal, cannot order payment of reinstatement salaries. For example, if the Decision of the Labor Arbiter declared the dismissal to be illegal but merely awarded separation pay in lieu of reinstatement, the NLRC (on appeal) cannot award reinstatement salaries if it reverses the Labor Arbiter’s Decision.
22) Appeal to the NLRC
Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders.
(ARTICLE 229, Labor Code of the Philippines)
The only remedy which the losing party can avail of from the decision of the Labor Arbiter is to appeal to NLRC.
(Egypt Air Local Employees Association v. National Labor Relations Commission, G.R. No. 98933, 01 March 1993)
The 2011 NLRC Rules of Procedure, as amended, do not allow a party to file a motion for reconsideration from a decision of the Labor Arbiter. Neither can a party file a motion for new trial nor can it file a petition for relief from judgment. These are prohibited pleadings under the rules.
(See Section 5 (f), Rule V, 2011 NLRC Rules of Procedure, as amended)
The right to appeal is a mere statutory privilege exercised only in the manner and in accordance with the requirements of the law. In Labor Cases, Article 229 of the Labor Code of the Philippines set forth the Rules on Appeal to the NLRC from the Decisions, Awards or Orders of the Labor Arbiter. The rules specifically provide that in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.
(Salazar v. Simbajon, G.R. No. 202374, 30 June 2021)
In order to stop the running of the period to perfect an appeal, a motion to reduce bond must comply with two conditions:
- that the motion to reduce bond shall be based on meritorious grounds; and
- a reasonable amount of bond in relation to the monetary award is posted by the appellant.
(Manrique v. Delta Earthmoving, Inc., G.R. No. 229429, 09 November 2020)
23) Decisions of Voluntary Arbitrators
Under the Labor Code, the award or decision of Voluntary Arbitrator shall be final and executory after 10 calendar days from notice. On the other hand, Rule 43 of the Rules of Court provides that an appeal from the judgment or final orders of voluntary arbitrators must be made within 15 days from notice. In Guagua National Colleges v. Court of Appeals, the Supreme Court clarified that the 10-day period in Article 276 should be understood as the time within which the adverse party may move for a reconsideration from the decision or award of the voluntary arbitrators. Thereafter, the aggrieved party may appeal to the Court of Appeals within 15 days from notice pursuant to Rule 43 of the Rules of Court.
(Social Housing Employees Association, Inc. v. Social Housing Finance Corp., G.R. No. 237729, 14 October 2020)
